United Arab Emirates flagship air carrier and freight company Emirates Group reported a profit of $456 million for the 32nd year running for the financial year 2019-20.
The group, which includes Emirates Airline and the Dubai National Air Transport Association (dnata), reported a strong performance last financial year but says it will have to increase debt to weather the COVID-19 crisis after the pandemic halted its passenger operations in March.
Emirates Airline and Group Chairman Sheikh Ahmed bin Saeed Al Maktoum said the company performed strongly for the first 11 months of 2019-20 and had been on track to deliver against business targets until the COVID-19 crisis struck.
“From mid-February things changed rapidly as the COVID-19 pandemic swept across the world, causing a sudden and tremendous drop in demand for international air travel as countries closed their borders and imposed stringent travel restrictions,” Al Maktoum said in an official statement.
Emirates Group overall finished the 2019-20 year with a strong cash balance of $7 billion, but due to the COVID-19 crisis decided not to pay a dividend to Investment Corporation of Dubai in order to protect its liquidity for the uncertain times ahead.
Nevertheless, Emirates plans to borrow cash in the first quarter of 2020-21 to guard against COVID-19-related liquidity shortfalls.
Al Maktoum said the airline and travel business is always vulnerable to external shocks, and the company has implemented “aggressive cost management measures” to safeguard Emirates Group until business resumes.
“The COVID-19 pandemic will have a huge impact on our 2020-21 performance, with Emirates’ passenger operations temporarily suspended since 25 March, and dnata’s businesses similarly affected by the drying up of flight traffic and travel demand all around the world,” the Chairman said.
“We expect it will take 18 months at least before travel demand returns to a semblance of normality,” Al Maktoum predicted.
Emirates Airlines recorded a $288 million profit, up 21% from the previous year, off the back of strong third- and fourth-quarter revenue and lower operating costs, primarily thanks to lower fuel prices.
The airline reported that the COVID-19 crisis in the last quarter and Dubai Airport runway closures shaved 6% off total revenue. It also said the strong US dollar caused the negative currency impact to jump substantially from $156 million to $262 million for this reporting period.
Meanwhile, dnata recorded a profit of $168 million despite a “sharp profit decline” of 57% due to losses from its travel division, the impact of COVID-19 on all activities, and write-offs from the Thomas Cook failure.
Without the one-off gain from divesting of its shares in IT company Accelya, dnata’s profits would have been down 72% compared to the same period last year.